According to those documents, the estimated total fee would be $15 per loaded TEU in 2009. Based on the current schedules of the projects, the fee would be $18 in 2010 and 2011. As projects are completed, the fee could be reduced to $14 in 2012 through 2014 and to $10 in 2015. Note that the ports may adjust the ICF rate based on a review of project schedules, public funding availability, anticipated expenditures, and the ICF fund balance.

So are you ready? Have you been doing your research? Have you done the following?

• Began discussion with your suppliers to prepare for the required information and additional coordination.
• Figure out whom will be your designated filer for the ISF, and how they will get the required information in a timely manner.
• Warned your accounting department that perhaps you need to hold more safety stock for transportation lead times, incase there is a “hold” notification sent by CBP to not let your cargo sail, and if that is the case you may be waiting at minimum an additional week for the next vessel’s rotation.
• Warned finance that your customs bond will probably need to dramatically increase (according to the proposed regulations).

So are you ready?

If you are confused about the above, we recommend the following websites for you and your accounting/finance department’s reading:

How to calculate: Divide the total costs by 0,88!

The former regulation effective since November 30^th, 2000 acc to Decree-Law No. 45.490 and in particular the paragraph # 317 Tax Substitution is no longer valid! Please take care of that new tax regulation which has to be applied on all files acc to above mentioned services. Regarding terminal services as like as service/handling fees, THC, warehousing/ pre-stacking / stuffing /unstuffing the ISS Service tax of 3% will be applied. (HWL Brazil & International Tax Review)

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New Ship Orders fall in 2008 after Freight Rates crash

A key measure of anticipated future prospects for the worlds logistics markets is the number of container ships being built. Over the past decade, demand in that sector has outstripped supply but the difficulties now being faced by ocean carriers are illustrated by a dramatic fall in orders for new container vessels over the past few months.

According to figures provided by UK-based Drewry Shipping Consultants, there was a 42.8% year-on-year decrease in container tonnage ordered from shipyards between the second quarter (Q2) of 2007 and Q2 2008, from 964,000 TEUs (twenty-foot equivalent units) to 552,000 TEUs. That was in spite of some very large orders placed by ocean carriers this year. For example, in Q2, Maersk Line alone ordered over 30 vessels in the range 4,500-4,750 TEUs. In addition, United Arab Shipping Company (UASC) placed an order for nine 13,100-TEU ships in May and June which, like all vessels of that size, are expected to be deployed in the Asia-Europe trade.

The size of the overall fall in demand for new ships this year is also partly due to the huge number of orders put in for vessels bigger than 10,000 TEUs in Q2 and Q3 2007. Those ships are also intended for the Asia-Europe trade, where volumes were growing fast until the beginning of this year. The total 964,000 TEUs tonnage order volume in Q2 last year was followed by 1.26m TEUs in Q3.

Over the last year, though, the Asia-Europe trade has experienced a 50% crash in basic freight rates for westbound (headhaul) traffic. In Q2 2008, on a year-on-year basis, the average dry container port-to-port base rate on that leg, excluding BAF (bunker adjustment factor) and THC (terminal handling charge) surcharges, dropped to US$500 per TEU, compared with $1,200 per TEU in Q2 2007.

However, shippers will not be confronted by a sudden shortage of container ship capacity as the lead time from order to delivery of big vessels in that category is over 18 months. So in the near future, there will be a vast flow of large new vessels into the market, possibly equal to as much as 50% of existing container ship capacity (Source: Transport Intelligence)

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Quest For Quality Award - Hellmann ranks 11 in 3PL category

According to the reporting of our intrepid John Paul Quinn in LM’s annual 3PL Market Report this past June, the overall market is still posting impressive revenue numbers despite a bit of a slowdown in the U.S.

While global 3PL gross revenues continue to surge ahead, posting a record $487 billion for 2007, the U.S. sector posted its second straight year of single-digit numbers after nearly a decade of averaging 14 percent annual growth. According to a recent report issued by Armstrong & Associates, a market-leading research firm, volume rose only 7.4 percent to $122 billion from last year’s $113.6 billion, and the consultants anticipate this slowdown drift will continue for the immediate future, wrote Quinn. Quinn added that during the coming year it will be interesting to watch these revenue numbers as shippers begin to reassess overseas strategies as the geographic fundamentals of sourcing begin to shift. Even so, it needs to be repeated that the U.S. 3PL industry’s growth pattern, despite its deceleration, is still more than triple that of the gross domestic product—numbers that any market would love to take to the bank.

And while 3PL revenues continue to surge on the growing reliance on the international marketplace, we’re happy to report that the overall scores in the 3PL category jumped up as well. Four of the five key attributes that shipper’s vote on in this category saw a subtle increase in 2008, led by Carrier Selection/Negotiation, which improved by 1.42 points over 2007.

It’s also important to note that shippers voted in 10 providers in 2008 that did not make the cut last year, marking a notable shifting of allegiance over the past year. In 2008, shippers welcomed Penske Logistics (35.92), Averitt Express Supply Chain Solutions (35.56), Crowley Logistics (35.49), Hellmann Worldwide Logistics (35.09), Caterpillar Logistics Services (35.01), Jacobson Companies (34.99), Landair (34.91), Saddle Creek Corp. (34.53), Lynden Logistics (34.00), and UTi International (33.87) up to the podium this year after missing the cut in 2007. (Source: Logistics Management)

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Shippers face multiple Challenges

Life isn’t easy these days if you’re a shipper. Shortages of vessel space and equipment, service changes by the carriers and multiple increases in freight rates and surcharges over the past year have combined to make the job even more challenging than it was. “You’re just going nuts taking all these rates,” said Ron Bailey, manager of Brewster Lines, a non-vessel-operating common carrier that serves UniGroup Worldwide UTS. Its parent company, UniGroup, owns United Van Lines and Mayflower Transit. Bailey said he has had up to 14 increases in freight rates and surcharges from one carrier in a single week.

The surcharges include bunker adjustment factors, emergency bunker adjustment factors, currency adjustment factors, inland fuel surcharges, terminal handling charges, container service charges, chassis usage charges, hazardous cargo charges, documentation fees, Panama Canal transit fees, port terminal security charges, low-sulfur fuel charges and Alameda Corridor surcharges.

Once Brewster gives customers a price quote, it has to keep that quote, Bailey said, though his costs may rise because of increases in freight rates and surcharges. And if a shipment misses a scheduled sailing because the carrier has overbooked, there can be a snowball effect. Besides the delay while the container waits for another sailing, there are the increased chances for missing paperwork and Customs holds. Brewster has to eat additional delivery, storage and packing costs that might flow from the missed sailing. As for its customers moving overseas, they may have to stay at a hotel, buy new clothes and either buy or rent furniture and a car, and eat out, while they wait for their shipment to arrive. That does not make for happy customers. “We must do all we can to make certain we have a means of getting a shipment from Point A to Point B,” Bailey said. Like other shippers, he admits to double booking some shipments with different carriers in the hope that one of them will have equipment and service in place.

Service cutbacks and route changes by the carriers have made it harder to find carriers at some ports, Bailey said, citing Charleston and Savannah as examples. “If you’re shipping out of Atlanta, and you have to go to Charleston instead of Savannah, it will cost you more,” he said. Equipment shortages at inland cities are another problem, Bailey said, citing Phoenix as an example. He has sometimes had to wait three or four weeks to get a container there. Those shortages have been exacerbated by the elimination of inland depots by some carriers.

Carrier mergers and vessel-sharing alliances have also reduced the options for shippers, he said, citing Maersk Line’s acquisition of P&O Nedlloyd and the possibility that Neptune Orient Lines, which owns APL, will buy Hapag-Lloyd.

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Changes in AES Rules

Effective June 1, 2008 the Department of Commerce has revised the rules for AES submission for all export shipments. These changes will become mandatory on October 1, 2008, but many carriers are requesting compliance prior to that date.

The major changes are as follows:

1. No paper SED submissions will be accepted by any ports
2. The time frames for submission of AES prior to shipment have changed:
   • Air Export: must be filed 2 hours prior to flight (no change)
   • Ocean Export: must be filed 1 days prior to shipment loading on the vessel (in reality, this means a minimum of 2 days prior to sailing).
3. The actual ITN number must be provided to the carrier/airline prior to the above deadline. The XTN number format will no longer be allowed. This requires that your logistics provider have all necessary documentation much earlier than before to ensure compliance with these deadlines.
4. The carrier will not move any shipment for which they do not have an ITN number (see above)
5. The exemption code for all shipments with a value of less than $2500.00 has changed to: 30.37 FTR
6. If you move goods that are subject to the following ECCN numbers, the ECCN number is now required for entry, not just the exemption code. The Export Control Classification Number (ECCN) will be required for license exceptions reportable under the following license codes:

C38-TSR	C46-AVS
C41-RPL	C47-APR
C42-GOV	C48-KMI
C43-GFT	C49-TAPS
C44-TSU	C50-ENC
C45-BAG

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US and Mexican States target faster Border Crossings

US and Mexican border states have agreed to develop a plan designed to speed up the crossing times for goods and people moving overland between their two countries.

At the 26th Annual Border Governors Conference on Friday (August 15), a joint declaration was reached among the 10 US and Mexican border states participating "that fosters a renewed commitment to reducing border wait times and improving the secure movement of people, goods and services across the US-Mexico border". The states involved were California, Arizona, New Mexico and Texas from the US and Baja California, Chihuahua, Coahuila, Nuevo Leon, Sonora and Tamaulipas in Mexico.

The joint declaration was the result of collaborative efforts by the Logistics and International Crossings Work Table, a bi-national group of government officials from the 10 states which produced four recommendations designed to improve commercial connectivity.

Those recommendations are:

• Supporting the US Customs and Border Protections efforts to obtain funding for additional border crossing inspectors and, along with Mexicos Institute of Migration, using available funding to immediately fill inspector vacancies at land ports of entry along the US-Mexico border.
• Reducing border wait times substantially by the year 2013 and completing bi-national state-to-state regional border master plans among the 10 border states within three years.
• Supporting border states requests for a presidential permit for international crossings, such as the Otay Mesa East Port of Entry in San Diego County, "that utilise alternative financing mechanisms to help minimise border wait times".
• Expanding the number of informational signs posted on the US side of the border to increase public awareness of weapons and ammunition laws.

"Reducing the time it takes for commercial and public transportation to cross the border will reduce the economic losses to both countries caused by delay," said Worktable co-chair and Caltrans director Will Kempton. (Sources: Caltrans & Transport Intelligence)

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Airport Group Break-up could create new UK Air Cargo Capacity

The company which manages a complex of major airports around London is faced with the likelihood that UK competition authorities will demand its break-up. BAA, which owns and operates the three largest airports in southern England, Heathrow, Gatwick and Stansted, was bought by Spanish construction company Ferrovial in 2006 for £10bn/€13bn.

The three London area airports are all major handlers of international passenger traffic. The largest of the three, Heathrow, is also Europes third largest air freight gateway and around 18th in the world with a throughput of just under 1.5m tonnes in 2007.

BAA has invested heavily in air cargo facilities at its large new terminal at Heathrow. However, the airport as a whole suffers from congestion problems, with passenger traffic inevitably favoured for access to resources such as land. Restrictions on services such as night flights limit the attractiveness of all three airports for dedicated all-cargo services but the sheer quantity of passenger aircraft bellyhold cargo capacity operating from them ensures they will remain important logistics nodes.

Competition authorities and airport regulators have been under pressure from airlines to consider the break-up of the BAA franchise. With a dominant position around London and further large international airports in other parts of Britain, notably Scotland, BAA is vulnerable to accusations that it has too large market share. It has been criticised by both airlines and others claiming that its airport charges are too high and that its operations are inefficient.

It is unknown which airport or airports BAA will be forced to sell. However, the two smaller locations at Gatwick to the south of London and Stansted to the north-east are the most likely targets, not least as BAA will be most keen to retain Heathrow.

Bidders for any of the airports are likely to be the sort of infrastructure investors that have been purchasing logistics assets such as container terminals over the past several years. Prominent amongst them is rumoured to be Australian bank Macquarie and GE.

Such cash rich buyers would be very likely to look at investing heavily in new capacity around London, the location for which would most likely be Stansted airport. That investment is very likely to include new cargo facilities. The only barrier for the creation of major new capacity there would be planning difficulties − existing plans for airport expansion at all sites in the south of England are encountering strong local opposition and political problems. (Source: Transport Intelligence)

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Trans-Pacific Fuel Surcharge headed for Record Level

Container lines in the Transpacific Stabilization Agreement on Monday confirmed that their floating bunker fuel surcharge, adjusted monthly according to a formula that tracks world fuel prices at key loading locations, will spike to a record level effective Sept. 1.

The higher surcharge reflects record fuel prices that topped $767 per ton in mid-July, up from $500 at the beginning of 2008 and $296 at the beginning of 2007. As to why the bunker charge is increasing at a time when fuel prices have been falling, NYK Line vice president and TSA revenue policy committee member Bill Payne emphasized that each month’s surcharge reflects average fuel prices during a reporting period 30-60 days earlier. This is done to comply with United States law requiring a minimum 30 days’ advance notice to the market in the event a particular rate or surcharge is to be raised. “Carriers pay the higher fuel costs out of pocket as those costs rise, cushioning the impact on shippers, and then must pass them through after the fact,” Payne said. “The good news with a floating formula is that, as prices fall, customers will start to see savings 30 to 60 days out.”

The 15 TSA carrier members noted that the surcharge is a guideline for the market. Service contracts with customers, including bunker surcharge terms, are addressed individually by the lines. APL Senior Vice President Bob Sappio, also an RPC committee member, noted in the announcement that while carriers and shippers have made significant progress in agreeing on a floating fuel surcharge, much more work remains. “If people think the high price of fuel is temporary they are mistaken,” Sappio said. “The trans-Pacific trade is simply not sustainable as it is presently constituted; carriers must recover a greater percentage of actual dollars spent on fuel.” (Source: Journal of Commerce)

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£400m Contract marks Start for London Gateway

DP World signed a £400 million contract to build the first phase of a new port at London Gateway, the most technically advanced container port in the world, integrated with Europe’s largest logistics park.

This is the first major contract to be awarded in the £1.5 billion project, due to be built over the next 10 to 15 years. The contract is over five years, and will see the construction of the first phase of the port’s quay providing three berths and over 1.2 kilometres of quay in a joint venture between Laing O’Rourke and Dredging International. The new port will eventually handle 3.5milion TEU, providing a much needed increase in capacity for the UK’s container terminals. The South Essex project is currently set to be the largest creator of new jobs in the UK, delivering over 12,000 in the coming years, and is the largest investment in the South East of England.

Chief Executive of London Gateway, Simon Moore, said:  “London Gateway is vitally important for today’s UK economy. It will deliver the most efficient and technologically advanced port in the world and much needed deep sea capacity for the UK.” London Gateway is the UK’s first deep sea container port for over 25 years and will change the way millions of consumer goods are transported around the country.

By integrating the new container port with a logistics park, many everyday goods will be sent to the nation’s shops without having to be hauled on a truck to a distribution centre often situated inland hundreds of miles away from a container port. Instead, goods will go straight into London Gateway’s own logistics park to be sorted and then sent directly to shops. By reducing the need for the goods to travel inland, the project will save 2,000 trucks from the UK’s highways every day. DP World estimates that by cutting out this inefficient part of the logistics process, London Gateway will take 52 million truck miles off the UK’s highways every year, reducing congestion, saving time, fuel and curbing carbon emissions. (Source: www.joc.com and DP World website)

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LA Productivity ‘down 40%’ as Contract Talks continue

Union slowdowns continue to plague the twin ports of LA/Long Beach, waterfront employers said Monday (July 21). Steve Getzug, spokesperson for the Pacific Maritime Association (PMA), said that productivity on one ship docked at APM Terminals’ Pier 400 in LA was down 40% on Friday (July 18). Productivity on three other ships docked at LA/Long Beach the same day was down 30%, he added. According to the PMA, overall productivity has dropped by 15% at LA/Long Beach since longshore workers on the US West Coast began a series of slowdown tactics after their six-year union contract expired. Getzug said the slowdowns fluctuate from vessel to vessel and terminal to terminal. Congestion is building at the container yards, some empties are not making it onto ships and ships are sailing without full cargo as operators try to maintain schedules. ‘There’s a bit of a contradiction,’ Getzug told CI eXpress. ‘Talks are continuing, which are always encouraging signs. But while both sides are continuing to negotiate, we’ve been 21 days without a contract and 11 days into slowdowns and it’s gumming up the works.’ He said some firms were forced to add labour to cover additional breaks, but couldn’t say whether they were hiring more of their own staff or extra longshore labour. The PMA claims that ILWU workers at the two southern California ports have been taking breaks at the same time, instead of staggered, and are generally working at a slower pace. As there is no contract in place, there is no means to arbitrate these complaints. However, International Longshore and Warehouse Union spokesperson Craig Merrilees said Sunday that dockworkers had been ‘quite patient’ and ‘moderate’ in their actions. PMA’s Getzug said that the other ports affected by the contract such as Oakland, Portland, Seattle and Tacoma are not experiencing the same slowdowns, apart from a four-hour stoppage at Tacoma on July 11. On the contract talks, he said progress was being made, but slowly. “We hope we can reach a fair agreement as quickly as possible and keep the ports running smoothly and safely.” (Source: Containerisation International)

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Lawmakers Eye Air-Cargo Screening

Lawmakers expressed concern about the Transportation Security Administrations ability to meet deadlines for screening air cargo carried on passenger aircraft. Rep. Sheila Jackson-Lee, D-Texas, chairwoman of the House Homeland Security Committee subcommittee that oversees transportation security, told government witnesses that the committee is concerned about the status of a pilot program to screen packages, the development of technology, and the number of TSA personnel that will be required to supervise cargo screening. Jackson-Lee noted that a law Congress passed in August 2007 to implement all recommendations of the 9/11 Commission will be a year old in August.

The law requires that 50 percent of passenger air cargo will be screened by February 2009, with 100 percent screening by August 2010. "It is vital that this Subcommittee be informed of any difficulties that have arisen in implementing this mandate," Jackson-Lee said. "Unless we are made aware of real or potential obstacles, we cannot help you obtain the tools and resources you lack, and we will not look fondly on future shortcomings we could have helped to resolve." At the same time, an industry representative testified that without federal funding, many forwarders could be forced to "opt out" of the Certified Cargo Screening Program (CCSP) because of the high cost of purchasing screening machinery. The CCSP, instituted by the Transportation Security Administration to help shippers comply with the 100-percent screening requirement, is a voluntary program that offers no federal assistance. "We are extremely concerned about the lack of government funding for the 100 percent screening mandate," said Brandon Fried, executive director of the Air Forwarders Association. "Congress stated that homeland security is a federal government priority. Certainly aviation security is included on that list of responsibilities. If it is a government mandate, for a government responsibility to secure our planes, why then is it not the governments money that provides for that security?" The groups members with less than 10 offices said they would not participate as a certified cargo screening facility without federal funding, Fried said.

The potential impact of opting out would be "dire" for forwarders and the economy. Non-participants could face significant delays for screening at the airport and could go out of business. Airports dont have the real estate to screen all cargo and airlines dont have the financial resources or personnel to expedite screening "just in time" cargo at the airport. The result, said Fried, could be delays of up to 48 hours in transporting cargo. This would cause additional security concerns and could jeopardize the integrity of perishables, such as medical supplies and fresh foods. (Source: Journal of Commerce, Air Cargo World)

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U.S. Express Traffic Slows

Traffic volume and shipments for the domestic U.S. air freight and express industry declined in 2007, according to a new report that portrays the premium air shipping industry as mired in a lengthy period of stagnation. The Air Cargo Management Group said domestic air express business eked out a 1 percent gain in revenue last year, to $32.8 billion, but largely because of fuel surcharges. By contrast, the shipment count for U.S. air express carriers actually declined 1.8 percent, and traffic measured in revenue ton miles fell 1.5 percent. "The industry remains at or near 1999 levels based on both these performance metrics," said Robert Dahl, project director at Seattle-based ACMG. "In other words, this industry has gone through eight years with no net growth." Dahl said early traffic figures from 2008 suggest the air express industry is not on a growth path this year. "In fact, there are numerous challenges facing the industry, including record-high fuel prices, a weak U.S. economy and a perceived shift of air shipments to trucks, which would lead to further traffic declines in 2008 and 2009," he said. (Source: Air Cargo World)

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Air France-KLM Modifies Surcharge Mechanism

Air France Cargo and KLM Cargo unveiled a fuel surcharge mechanism based on flight miles to better reflect todays realities of punishing high jet fuel prices as well as provide shippers with a more transparent method of collecting the fee from customers. The revised mechanism also represents a complete change of the present model for air cargo surcharges. Effective Sept. 1, the fuel surcharges will be incorporated into the shipping rates, making them commissionable.

Under the old system, forwarders complained that the carriers would adjust the fuel surcharges but let the rates stagnate or slide. The portion of the fuel surcharge going to the forwarder was reduced under the old system. The United States dollar will serve as the basis for the new mechanism and be converted to the Euro and other currencies for invoicing. Existing exchange rates will be used to determine the new fuel surcharge levels should prices increase or decrease. "The validity of the current fuel surcharge mechanism is at its end as the important underlying factors (the United States dollar and the price of oil) have gone to structural new levels," said Michael Wisbrun, Executive VP Air France-KLM Cargo. "For transparency reasons and in answer to the requests of our customers, Air France Cargo-KLM Cargo is taking this step." The new model will be based upon short haul, medium haul and long hall flights, and fuel surcharge increases and decreases will now be implemented in steps of ten cents instead of 5 cents. "In order to increase stability and prevent changes due to short-term peaks, a monthly moving average will be used for the jet fuel price," said a statement. "Its good to see that at least one carrier is facing the reality of fuel surcharges based on actual distance flown, as opposed to not considering the length of the mission itself," said Brandon Fried, Executive Director of the Airforwarders Association. Another issue to consider, said Fried, is that carriers are charging for volume weight, not actual weight, which allows them to charge customers a higher rate. A number of forwarders told Fried this is a big problem.

Another issue: In the past, fuel surcharges for the most part werent commissionable. So this move by Air France and KLM to alter the fuel surcharge mechanism is precedent setting, Fried said. The revised method represents the first modification since Air France Cargo and KLM Cargo introduced the fuel surcharge mechanism in 2000. (Source: Air Cargo World)

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3PL Market Update

The report “3PL Market Update: The Shift is on” states that while global third party logistics (3PL) gross revenues continue to surge ahead – posting a record $487 billion for 2007 – the U.S. sector posted its second straight year of single-digit numbers after nearly a decade of averaging 14% annual growth. U.S. volume rose only 7.4% to $122 billion from last year’s 113.6 billion, according to Armstrong Associates, Inc. The 3PL market research firm anticipates this slowdown drift will continue for the immediate future. “We estimate that growth this year will be only 4.5%, and looking ahead to 2010 we see annual numbers at best similar to the 7% gain of 2007. Even so, it should be noted that the U.S. 3PL industry’s growth pattern, despite its deceleration, is still more than triple that of the gross domestic product. In terms of net revenue across the four man 3PL segments, international transportation management once again led the field, up 9.5%, followed by domestic transportation management at 8%, and value-added warehousing and distribution at 7.7%. In terms of geographic opportunity, it is believed that U.S. 3PLs with strong freight-forwarding capabilities in the Asia-Europe land will fare better than those working Asia-U.S. routes which have seen some decline in traffic. It is expected that international transportation management will continue to lead the other segments through 2010 with a growth rate between 8-10%.

The article identifies three trends on the global 3PL scene: First, a shift in sourcing. Manufacturer outsourcing of production or assembly has moved from Japan, Hong Kong and Taiwan, to areas such as Vietnam, Myanmar and India. 3PL providers have had to adjust their own planning and servicing capabilities. The second trend has to do with a basic acceleration of change in world commerce. Expectations of the buying public have risen and increased the need for manufacturers, carriers, and 3PLs to meet or exceed those expectations. The third factor hinges on the inflated price of fossil fuel. All three trends are interrelated, and have developed very quickly and virtually simultaneously.

Within the report, Logistics Management has also published its annual ranking of the Top 50 Global Logistics Providers: Hellmann Worldwide Logistics ranked 23rd with $3.7 billion in Gross Revenue for 2007! (Source: Logistics Management)

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China to Halt Hazmats

Chinas civil aviation authority will restrict transportation of dangerous goods in the country from July 1 through September 30. The Civil Aviation Authority of China will forbid transportation of all dangerous goods except medical items for human diseases at the airports of Beijing, Shanghai, Tianjin, Shenyang, Qinhuangdao and Qingdao. The new rules are undertaken to enhance security during the Beijing Olympic Games. At all other Chinese airports, the transportation of certain classes of "hyper dangerous" goods such as toxic gases not including aerosols, infectious substances and radioactive materials will require approvals from the state aviation agency. The order, numbered CAAC [2008] 52, also calls for enhanced security at all levels and warns shipping violators will be punished under the law. (Source: Air Cargo World)

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Warehousing Grows, Slowly

One of the more resilient links in the global supply chain - the warehouse - may finally be feeling the effects of the economic slowdown and soaring fuel prices. Revenue growth among at North Americas estimated 8,000 commercial warehouses grew 7.7 percent in 2007, compared with 9.7 percent in 2006 and 9.5 percent in 2005, according to Armstrong & Associates "Warehousing in North America - 2008."

Though those figures would still be estimable for many industries, the trend in warehousing is away from the double-digit annual growth rates seen during much of the 1990s and early 2000s. Further, rising energy costs, looming regulations and a deteriorating freight economy are forcing shippers and their service providers to dig deeper to offset rising costs while maintaining service quality, making superior growth forecasts that much harder to support.

The continents 1.25 billion square feet of commercial warehouse capacity racked up $46 billion in gross revenue last year, and about $37.5 billion in net earnings, according to Armstrong. Value-added warehousing and distribution providers accounted for $27.6 billion in gross revenue and $22.5 billion in net earnings, after subtracting purchased transportation. Unlike trucking, where profit margins have been battered by the doubling of fuel prices in the last year, warehouse operators are largely immune from spiraling petroleum costs. Even among those providers who offer distribution services, the fuel price spikes have been mostly passed through to shippers and carriers.

But while warehouse operators dont take the brunt of the ongoing cost pressure, their customers - manufacturers, retailers, truckers and other carriers - feel it acutely. For the warehousing industry as a whole, Armstrong said, "Weve reached a level in this business where the third-party logistics providers have very good capabilities. And what were seeing is an expansion of those capabilities with a better IT base all the time.

Between this maturing North American warehouse market and the weakening economy, "Overall there hasnt been any significant movement in pricing," he said. Anderson said warehouse operators with 3PL capabilities are trying to differentiate themselves to earn higher margins. Theyll bid to take over truck brokerage or offer load consolidation to keep the customers costs down and earn themselves a bigger portion of that business, Anderson said. Over time, Armstrong and Anderson say, a new high-cost transportation environment will force shippers to make distribution network changes that could benefit warehouse operators. Pending regulations on everything from customs to fuel and air quality will intensify the pressure. (Source: Traffic World)

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TSA Announces Certified Cargo Screening Program

The Transportation Security Administration is working feverously to screen all passenger plane cargo by Aug. 3, 2010, in accordance with "Implementing the Recommendations of the 9/11 Commission Act of 2007." Fifty percent of such cargo must be screened by Feb. 3, 2009.

The system must, "provide a level of security commensurate with the level of security for the screening of checked baggage." TSA requires the screening of all cargo at the piece level prior to boarding a passenger aircraft. To assist in achieving the requirements under the Act, TSA is designing a program known as the Certified Cargo Screening Program.

Allowing the CCSP to be included as a tool, as part of the risk based, multi-level screening arsenal, makes sense because it balances the need for security on passenger planes while meeting the needs of the shipping public. It could help avoid significant handling delays at airlines where all screening currently takes place and where existing space and labor constraints will be exacerbated under the full screening mandate.

The program carries cargo security into the supply chain through effective shipper and forwarder involvement instead of dropping freight at the door of the plane at the last minute. TSA claims all certified screeners will experience decreased cargo delays and expedited supply chain flow. They will have the ability to ship certain cargo types without potential invasive screening later on in the chain and be able to shrink wrap consolidations and build bulk configurations. They will also avoid potential cargo screening fees by entities later in the supply chain. The CCSP will enable Certified Cargo Screening Facilities to screen cargo prior to acceptance at the freight forwarder or air carrier.

The program is open to 3PLs, manufacturing facilities and distribution centers if their facility directly tenders cargo to a freight forwarder or air carrier. These entities must adhere to stringent security requirements set by the TSA that include onsite validations, periodic inspections, maintaining strict chain of custody measures and the requirement to screen cargo at the piece level. Shippers volunteering for this program will become regulated parties subject to strict TSA oversight.

Forwarders are also eligible to apply, but for a price. Unlike shippers, they will be required to purchase TSA-certified technology to perform the task. Forwarders will also bear the significant tab of training employees to operate the machinery. Although the agency has not released an official cost, some believe it could reach up to $150,000 per facility with no government funding assistance available to reimburse costs. That is a big sum for most small to medium sized forwarders competing on characteristically razor thin industry margins.

Securing aircraft and air cargo comes with a hefty price tag, but the government has a responsibility to provide safe, secure transportation systems for the American traveling public. However, government leaders seem to have lost sight of the costs and the governments role in securing the homeland. Screening all air cargo under the new legislation tops $3.6 billion, according to the Government Accountability Office. Yet, the White House is requesting just $106 million to perform the task.

That it is a volunteer program should not detract from the serious economic repercussions posed to those who are forced to opt out. Those companies choosing not to become CCSFs are likely to face bottlenecks at the airport, causing significant handling delays as airlines screen their shipments. It is critical that Congress addresses this issue promptly to ensure consumers and businesses are not faced with a competitive disadvantage which has the potential to put forwarders out of business. The CCSP has the potential to be a progressive tool by having the shipping public help make skies safer. However, forwarders should not have to assume the full financial burden for an inherently governmental function. (Source: Air Cargo World)

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OECD Cuts Growth Forecasts

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Freight Index Unchanged

After a record decline in March, the U.S. Freight Transportation Services Index was unchanged in April. Combining statistics for trucking, railroad and intermodal freight, barges, pipelines and air cargo, the Department of Transportations Bureau of Transportation Statistics reported that April was the third consecutive month without any growth. While February and April were flat, March saw the largest decline since August 2006, offsetting Januarys increase, which was the largest in two years. At 109.4 in April, the freight TSI was up 1.3 percent since its recent low of 108 in September but down 3.3 percent from its peak of 113.1 reached in November 2005. The bare 0.1 percent increase over April of 2007 follows two consecutive April-to-April declines. (Source: JoC)

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Fuel Puts Airlines in Red

Hit hard by rising jet fuel costs, the United States major passenger airlines combined for more than $1.3 billion in losses in the first quarter, in the worst financial performance for the carriers in nearly three years, according to the U.S. Department of Transportation. The carriers combined operating loss margin in the first three months was 5.2 percent, the DOTs Bureau of Transportation Statistics said, a sharp turn downward from the 7.7 percent profit margin the airlines showed in last years first quarter. The results were particularly bleak since they came largely before a sharp escalation in jet fuel prices that sent finances into a tailspin. Fuel had an enormous impact on the results, however, eating up 29.4 percent of the airlines operating expenses in the first quarter compared to 13.8 percent in the same quarter five years ago. Fuel cost the seven largest passenger airlines more than $7.9 billion in the first quarter and the expense per available seat mile was 50 percent greater than in the same quarter last year. (Source: Air Cargo World)

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Oil Fuels Trade Deficit

The United States trade deficit grew more than expected in April, by nearly 7.8 percent to $60.9 billion from a downwardly revised $56.5 billion in March. It was the biggest monthly increase since September 2005. Exports and imports also set records, the Commerce Department reported.

A key factor was record-high crude oil prices, which climbed $6.98 to $96.81 per barrel in April, the second-highest increase on record. Imports from Saudi Arabia, Venezuela and other members of OPEC totaled $20.9 billion, also a record. Imports of goods and services topped the previous high mark at $216.4 billion, and showed their biggest one-month gain since November 2002. Along with oil, autos and capital goods recovered from a drop in March. The trade gap with China increased by nearly 26 percent to $20.2 billion, as imports surged and U.S. exports slumped.

Buoyed by the weak dollar, U.S. exports rebounded to a record $155.5 billion after dropping slightly in March. On-year gains were posted by industrial supplies and materials, capital goods, foods and beverages, consumer goods and automotive vehicles and parts. Imports posting gains from April 2007 included industrial supplies and materials, capital goods, consumer goods, and foods and beverages. Auto imports were virtually unchanged. For the three months ending in April, exports averaged $153.2 billion, while imports averaged $212.5 billion, for a deficit of $59.3 billion. For the three months ending in March, the average trade deficit was $58.3 billion, reflecting average exports of $151.4 billion and average imports of $209.7 billion. (Source: JoC)

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U.S. Airlines Drop Capacity

Two of the largest airlines in the United States will dramatically reduce the size of their fleets and staffs in the coming year. United Airlines said it would remove 100 planes from its mainline fleet and lay off 1,400 to 1,600 employees. Continental Airlines said it would let go of 67 planes and 3,000 jobs. The cuts at United involve 17 percent of the airlines capacity in an effort to bolster pricing and reduce costs as rising jet fuel prices are expected to add $3 billion to expenses this year. The company expects to retire 30 previously announced Boeing 737s and another 50 by the end of the year. Twenty more planes will go out of service by the end of 2009.

"Today we are taking additional, aggressive steps that demonstrate our commitment to size our business appropriately to reflect the current market reality, leverage capacity discipline to pass commodity costs on to customers, develop new revenue streams and continue to reduce non-fuel costs and capital expenditures," said Glenn Tilton, Uniteds chairman, president and CEO.

Continentals cuts will reduce mainline capacity 11 percent in the face of jet fuel price increases of as much as 75 perce